Dunning letters: what they are, the process and examples

Dunning means asking a customer to pay money they owe.

In accounts receivable, the dunning process is the series of actions a business takes after an invoice approaches or passes its due date.

That often includes:

1. A friendly reminder.
2. An overdue notice.
3. A request for a firm payment date.
4. A firmer escalation.
5. A final notice.

"Dunning" can sound more formal than "chasing invoices", but the basic idea is simple.

An invoice has not been paid, so the business follows up until it is resolved.

A dunning letter is one communication within that process.

Despite the word "letter", it does not have to arrive through the post. Most B2B dunning now happens by email.

A typical dunning letter includes:

• The customer name.
• Invoice number.
• Amount outstanding.
• Original due date.
• What you want the customer to do next.
• Who to contact if there is a problem.

Later-stage dunning notices might also include a response deadline or explain what the business intends to consider next.

The word dunning is used in two slightly different ways.

B2B invoice dunning

This is what we are covering here.

A business sends an invoice to another business with agreed payment terms. The invoice becomes overdue, so the supplier follows up until payment is made or the reason for non-payment is resolved.

The customer may reply with a payment date, dispute, missing PO, invoice query or another blocker.

Subscription dunning

Subscription businesses also use the word dunning for recovering failed recurring payments.

For example, a card might expire or a payment attempt might fail. The dunning process can then include retrying the payment and asking the customer to update their billing details.

The two processes share a goal, but they are not the same problem.

For B2B invoices, you often need to understand why a particular invoice has not been paid and deal with a human response.

A useful B2B dunning cycle moves through several levels.

The exact timing depends on your payment terms and customer relationship.

You do not need to follow these exact dates.

What matters is that each step has a reason.

At the first level, assume the delay may be simple.

Subject: Payment reminder: invoice [Invoice number]

Hi [Customer name],

Just a quick reminder about invoice [Invoice number] for [Amount], due on [Due date].

I've attached the invoice again here for reference.

Please let me know if you need anything from our side before payment is processed.

Thanks,

[Your name]

The goal is visibility.

You are not escalating yet.

For more examples around the due date, see our payment reminder email templates.

Once the invoice is clearly late, ask what is happening.

Subject: Overdue invoice [Invoice number]

Hi [Customer name],

I'm following up on invoice [Invoice number] for [Amount], which was due on [Due date].

Could you confirm when payment is scheduled?

If there's anything holding it up, let me know and I'll help get it resolved.

Thanks,

[Your name]

This is an important stage because the customer may finally tell you why the invoice is unpaid.

If they need a PO, another dunning notice will not solve it.

If they dispute the invoice, normal dunning should stop while the issue is resolved.

Once the invoice has been outstanding for longer, get more specific.

Subject: Payment date required for invoice [Invoice number]

Hi [Customer name],

Invoice [Invoice number] for [Amount] remains unpaid and is now overdue.

Please could you confirm the date payment will be made?

If there is an issue preventing payment, let me know what needs to be resolved from our side.

Thanks,

[Your name]

If the customer says they will pay on a particular date, record it.

Then follow up if they miss it.

That is more useful than continuing to send reminders based only on how old the invoice is.

At this point, you may need another person involved.

Subject: Action required: overdue invoice [Invoice number]

Hi [Customer name],

I'm following up again regarding invoice [Invoice number] for [Amount], originally due on [Due date].

The balance remains outstanding.

Please confirm when payment will be made, or let me know who I should speak with to get this resolved.

If there is an issue with the invoice that has not yet been raised, please send me the details.

Thanks,

[Your name]

You are still giving the customer a route to resolve the problem.

The message is firmer, but it is not hostile.

A final dunning notice should make the position clear.

Subject: Final notice: invoice [Invoice number]

Hi [Customer name],

This is a final notice regarding invoice [Invoice number] for [Amount], which was due on [Due date] and remains unpaid.

Please arrange payment or contact me by [Date] to confirm how the outstanding balance will be resolved.

If there is an issue with the invoice that has not yet been raised, please let me know immediately.

If we do not receive payment or hear from you by [Date], we will review the next steps available to us for recovering the outstanding amount.

Regards,

[Your name]

Only mention a specific legal or recovery action if you genuinely intend to take it and understand the process involved.

A final notice should not contain an empty threat.

The terms overlap, but they can imply different stages.

Dunning letter

Usually part of the normal accounts receivable process.

It can range from a friendly reminder to a fairly firm overdue notice.

Collection letter

"Collection letter" is often used more broadly for a message seeking payment of an overdue amount.

It may come from the original supplier or, at a later stage, from a third party involved in recovery.

Demand letter

A demand letter is generally more formal.

It sets out what is owed, what the sender wants and what may happen if the matter is not resolved.

If you are moving from ordinary invoice chasing toward legal action, do not assume an ordinary dunning email is the same thing as completing any required pre-action steps.

If a B2B invoice in England or Wales is moving toward a court claim, the process becomes more formal.

The Civil Procedure Rules set expectations around what parties should do before proceedings begin. Where no specific pre-action protocol applies, the usual steps include the claimant writing to the other party with concise details of the claim, the relevant facts, what they want and how any amount claimed has been calculated. The parties are also expected to consider whether the dispute can be resolved before court proceedings begin.

Importantly, the specific Pre-Action Protocol for Debt Claims generally applies where a business is claiming a debt from an individual, including a sole trader. It does not generally apply to ordinary business-to-business debts where the debtor is a company.

So if you are considering court action, check which procedure applies to your particular situation rather than treating a standard dunning template as a legal letter before action.

This is general information, not legal advice.

A good dunning procedure needs to track what happens between the emails.

For every overdue invoice, you should know:

• When the customer was last contacted.
• Whether they replied.
• What they said.
• Whether they promised a payment date.
• Whether that date has passed.
• Whether the invoice is disputed.
• Whether something is blocking payment.
• What needs to happen next.
• Who owns that action.

Consider this example.

You send a Level 2 dunning email.

The customer replies:

We can pay next Friday.

The correct next action is not Level 3 seven days later.

It is to record Friday as the promised payment date, check whether payment arrives, then follow up if it does not.

Or the customer replies:

We can't process this without PO 12345.

Again, the next action is not another reminder.

Someone needs to fix the PO problem.

That is why effective dunning management is really about managing exceptions and next actions.

Our complete collections email sequence includes templates for the most common customer replies.

A dunning cycle should stop when the invoice is paid.

It should also pause when continuing the standard sequence no longer makes sense.

For example:

The invoice is disputed

Stop ordinary reminders and resolve the dispute.

The customer has promised payment

Track the promised date rather than continuing on the old calendar.

Information is missing

Fix the missing PO, incorrect invoice or wrong contact first.

The customer needs a payment plan

Decide whether you are willing to agree one and, if so, track the agreed installments.

Normal collections have failed

Move the invoice into whatever escalation or formal recovery process your business uses.

Continuing to send automatic dunning notices regardless of what has happened is likely to create noise rather than progress.

Automated dunning uses software to handle some or all of the follow-up process.

At the simplest level, that means scheduling invoice reminders based on due dates.

For example:

• Send a reminder three days before an invoice is due.
• Send another seven days after.
• Send a firmer notice after 14 days.

That can save manual work.

But timing is only one part of the problem.

The more useful question is what the software does when the customer answers.

For B2B invoices, useful dunning software should help with more than sending a sequence of emails.

Look at whether it can:

• Use your existing invoice information.
• Track overdue invoices.
• Keep a history of communications.
• Record promised payment dates.
• Stop reminders when invoices are paid.
• Pause or change the process when an invoice is disputed.
• Surface blockers such as missing POs or wrong contacts.
• Give a person control when judgment is needed.

The right level of automation depends on your business.

If you send a small number of invoices each month, a spreadsheet and calendar reminders may be enough.

As invoice volume grows, keeping track of what every customer said can become more work than sending the emails themselves.